96 / 278
PRYSMIAN GROUP | DIRECTORS’ REPORT
96
A more detailed analysis of the risk in question can nonetheless be found in the "Financial Risk
Management" section of the Explanatory Notes to the Consolidated Financial Statements.
Liquidity risk
Liquidity risk indicates the sufficiency of an entity's financial resources to meet its obligations to business or
financial partners on the agreed due dates.
With regard to the Prysmian Group's working capital cash requirements, these increase significantly during
the first half of the year when it commences production in anticipation of order intake, with a consequent
temporary increase in net financial debt.
Prudent management of liquidity risk involves the maintenance of adequate levels of cash, cash equivalents
and short-term securities, the maintenance of an adequate amount of committed credit lines, and timely
renegotiation of loans before their maturity. Due to the dynamic nature of the business in which the Prysmian
Group operates, the Group Finance Department favours flexible arrangements for sourcing funds in the form
of committed credit lines.
As at 31 December 2015, the Group's total financial resources, comprising cash and cash equivalents and
undrawn committed credit lines, came to in excess of Euro 1 billion.
A more detailed analysis of the risk in question can nonetheless be found in the "Financial Risk
Management" section of the Explanatory Notes to the Consolidated Financial Statements
.
Risks associated with commodity price volatility
The main commodities purchased by the Prysmian Group are copper and aluminium, accounting for more
than 50% of the total raw materials used to manufacture its products. The Group neutralises the impact of
possible rises in the price of copper and its other principal raw materials through hedging activities and
automatic sales price adjustment mechanisms. Hedging activities are based on sales contracts or sales
forecasts, which if not met, could expose the Group to commodity price volatility risk.
A dedicated team within the Group Purchasing department centrally monitors sales transactions requiring
the purchase of raw materials and the related hedging activities carried out by each subsidiary.
In addition, if the oil crisis were to continue with prices stabilising at the current level, the extraction market
would be less appealing and this would expose the SURF and Oil & Gas businesses to a possible
contraction in demand, although this would not have a significant impact on the Group. In fact, these
businesses account for about 6% of the Group's Sales and 3% of Adjusted EBITDA.
A more detailed analysis of the risk in question can nonetheless be found in the "Financial Risk
Management" section of the Explanatory Notes to the Consolidated Financial Statements.
OPERATIONAL RISKS
Liability for product quality/defects
Any defects in the design and manufacture of the Prysmian Group's products could give rise to civil or
criminal liability in relation to customers or third parties. Therefore, the Group, like other companies in the